Articles Of Association by Samidha Hegde@Lexcliq

Articles Of Association

Introduction-

Articles of Association is a document that contains the rules, bye-laws and regulations for the management of the company. Articles of Association is a very important document as they affect the internal affairs of the Company and prescribe the mode for change in internal regulation of the Company from time to time. They act as a rulebook for the organization and defines the purpose and strategies to accomplish Company’s long-term and short-term goals. Articles of Association act as subordinate to the Memorandum of the Company and must always go hand in hand with Company’s Memorandum and any Articles of Association that exceeds the limits and is conflicting with the Memorandum will be deemed ultra vires.

Definition –Articles:

As per Section 2(5) of the Companies Act,2013 “articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act.

Section 5 of the Companies Act,2013 deals with AOA.

The articles of a company shall contain the regulations for management of the company.

The articles shall also contain such matters, as may be prescribed.

It shall be not prevent a company from including such additional matters in its articles as may be considered necessary for its management.

 

Objective of Articles of Association-

The objective of Articles of Association is to accomplish the objectives of Memorandum of Association of the Company. It may be adopted for these purposes-

  • To operate the daily activity of the company properly.
  • For explaining rules and regulations of Company’s internal functions
  • For capital distribution of the Company based on Company’s classification of shares.
  • To explain the provisions of Memorandum of Association of the Company
  • To explain power, functions, duties and rights of the directors of the Company
  • To determine financial and non-financial obligations of the Company
  • To integrate Meetings and minutes, notices etc.
  • To reserve the security of the company’s seal or logo.
  • To determine dividend policy of the Company
  • To determine mode of winding up or dissolution of Company

Whether Articles of Association can be altered?

Articles of Association can be altered any time by a special resolution as per Company’s Act,2013. Each time the Articles of Association is altered by a special resolution the same must be filed with the Registrar within 30 days of its passing.

It must be ensured that-

  1. The proposed alteration should not contravene the provisions of the Companies Act.
  2. The proposed alteration should not contravene the provisions of the Memorandum of Association.
  3. The alteration should not propose anything that is illegal.
  4. The alteration should be bonafide for the benefit of the company.
  5. The proposed alteration should in no way increase the liability of existing members.
  6. Alteration can be made only by a special resolution.
  7. Alteration can be done with retrospective effect.
  8. The Court does not have any power to order alteration of the Articles of Association.

 

Conclusion-

Articles of association is a crucial document of a Company that provides the rules and regulations of the company and defines the relationship between the Company and its shareholders. The provisions of Articles of Association are binding on the all the members as well as the company. Those who enter into agreements with the Company must be aware of its Articles of Association so that they can enforce the agreement in case of default. Likewise, if there is default on part of the members the company may sue them too. Thus the actions of the Company are limited to the sphere of articles of association.

References-

https://taxguru.in/company-law/memorandum-articles-association-companies-act2013.html

https://qsstudy.com/business-studies/objectives-articles-association

https://accountlearning.com/articles-of-association-meaning-contents-alteration-of-aoa/

https://www.pdffiles.in/contents-of-articles-of-association/

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